UK pays Eurotunnel €38 million over no-deal Brexit ferry contracts scandal

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By Cristina Abellan Matamoros  with Reuters
UK pays Eurotunnel €38 million over no-deal Brexit ferry contracts scandal
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The British government has paid £33 million (€38 million) to Eurotunnel, which runs the Channel Tunnel between the UK and France, after the company took legal action over the process to award ferry contracts to cope with a no-deal Brexit.

Eurotunnel in January expressed concern over the £103 million (more than €113 million) deal to the three ferry companies that would provide additional freight capacity on new routes across the Channel in case of a no-deal Brexit.

The company hit out at what it dubbed the "distortionary" and anti-competitive behaviour of the British government and the use of public funds.

The British government said it had reached an agreement with Eurotunnel to settle the case and make sure the company would keep transporting people and freight across the border.

"The agreement with Eurotunnel secures the government’s additional freight capacity, helping ensure that the NHS has essential medicines in the event of a no-deal Brexit," said Transport Secretary Chris Grayling.

"While it is disappointing that Eurotunnel chose to take legal action on contracts in place to ensure the smooth supply of vital medicines, I am pleased that this agreement will ensure the Channel Tunnel is ready for a post-Brexit world."

Eurotunnel also issued a statement saying it had reached an out-of-court settlement that would ensure that the Channel Tunnel would remain "the preferred route" for goods to travel between the EU and UK.

"The agreement enables the development of infrastructure, security and border measures that will guarantee the flow of vehicles carrying urgent and vital goods, thereby keeping supply chains essential to both industry and consumers moving.”

What are the contracts about?

Back in December, the British government announced that it would spend more than £100 million (€111 million) chartering extra ferries to relieve cross-Channel traffic congestion in case the UK does not secure a deal to leave the European Union this year.

Extra ships would be needed to work new routes across the Channel if the French port of Calais and Britain’s Dover and Folkestone are slowed down by new customs procedures.

The new routes would go through English southern ports including Poole, Portsmouth, and Plymouth.

As of right now, trucks can easily cross borders between Britain and the rest of the bloc. But a no-deal Brexit would mean delays at customs for each truck would clog up roads at both sides of the Channel.

READ MORE: Truck drivers support Brexit despite fears of no-deal chaos

Around 16,000 trucks drive between Dover and Calais every day, with everything from perishable food to medicines and industrial goods needed for factories.

What is Eurotunnel's concern?

Eurotunnel said they wanted to secure a similar contract for itself to increase their transport capacity. Otherwise, they warned they would consider legal action against the transport ministry in the UK and France.

A letter obtained by the Financial Times said that the effects of the deal would be a “unilateral breach not only of the Concession Agreement with Eurotunnel” but also of the “existing competition and state aid law”.

Chief executive of Getlink (the Paris-based parent company of Eurotunnel) Jacques Gounon, who authored the letter, accused the government of ignoring "Le Shuttle" — Eurotunnel's train service for vehicles — and said it would remain the fastest way to transport goods into the UK even after Britain leaves the EU.

Gounon said they are working on projects to increase the number of freight trains running every day and building a freight terminal for “unaccompanied trailers” in Folkestone, which he says will need public funds.

Concern over contract to freight company with no ships

The Labour Party criticised the British government for awarding a £14 million (€15 million) contract to a ferry company with no ships.

Labour's transport spokesman, Andy McDonald, said the transport ministry had not carried out proper checks on Seaborne Freight before awarding it with a contract.

"Our economy depends on these trading routes continuing to function yet Chris Grayling is prepared to rely on amateurs in the event of a no deal," he said.

"It is not uncommon that they do not own their own vessels and will be chartering them through third parties...The bids we received to provide capacity were subject to technical, financial and commercial assurance," said Grayling on Monday.

Ben Sharp, the Chief Executive of Seaborne Freight, told Reuters the company had been working on getting a ferry service for the last two years.

Seaborne Freight was accused a week earlier of copying its business terms and conditions from a takeaway delivery company. Seaborne has since updated its website.

The two other companies awarded contracts are established operators — French firm Brittany Ferries and Danish group DFDS.