Information Bulletin
04 October 2006
Shetland Islands Council update on State Aid investigations
Significant progress has been made by the Shetland Islands Council this week to address the issues faced by the Council following the anonymous complaints given to the European Commission alleging breach of state aid rules.
Following local discussions with MP’s; Tavish Scott and Alistair Carmichael on Monday, The Convenor of the Shetland Islands Council, Sandy Cluness led positive discussions yesterday in a videoconference briefing with leading UK MEP’s in Brussels to discuss the impact of the EU state aid issues on Shetland.
The Convenor was given “united support” from the MEP’s involved in the briefing and their understanding of the “urgency” of these issues for Shetland with a sense that solutions needed to be found quickly to the immediate issues faced by these investigations, and importantly for the long-term of how Shetland would be able to use its own assets to continue in investing in the local business community.
Convenor of the Shetland Islands Council, Sandy Cluness said " This is a battle we must win. These funds are not derived from either Europe or the UK but from our own community's resources, and these schemes were designed to protect and sustain our industries for the present and for the future. We do not believe these investments are in breach of the state aids legislation and we will do everything possible to protect the recipient companies and individuals from having to make repayments that might well jeopardise their businesses.
Our enablement to provide assistance to the private sector was given authority by the ZCC Act, and has been examined and approved by various legal firms and government agencies over the years. European and UK legislators owe it to this small community to find a solution to our present difficulties with the minimum delay. We shall be taking this process forward with Geoffrey Hoon and other appropriate members of parliament and staff in London, and also with Commissioner Borg and Ross Finnie on their visit to Shetland later this month."
As Alistair Carmichael MP for Orkney and Shetland noted, ” This is an issue of crucial
importance to Shetland's future economic development. It is essential that Shetland's representatives at all levels work together to get an early and satisfactory conclusion. The original purpose of the state
aid regulations - governing competition within the European market – was a sensible one. When they are seen to operate to our disadvantage in this way then you have to feel that something has gone badly wrong.”
A specialist team of lawyers have also been working with the Council and Shetland Development Trust to develop a robust case to demonstrate to the Commission that the schemes were compatible with the common market.
Over 40 businesses and 82 local fishermen could be affected by the serious concerns raised by the European Commission within the following four scheme areas:
- First Time shareholders scheme
- Fishing Vessel Modernisation scheme
- Fish Factory improvement scheme
- Salmon Farming and Fish Processing Loan assistance scheme run by the Shetland Development Trust
These individuals and companies have been written to over the last few days with an understanding that under European law the Council has been obliged to inform all loan and grant recipients of the further investigation into these schemes and the possibility of the benefit/grant being recovered. No recipients have been asked to take any action at this time. The total monies which has been given by the Shetland Islands Council in grant assistance within these four schemes is £771,193.41.
The total monies given as loans with the Salmon Farming and Fish Processing Loan Assistance scheme operated by the Shetland Development Trust is £3,949,430.00.
The total monies repaid in full by recipients to the Shetland Development Trust were £1,897,981.00, with £281,084.40 still being collected. The remaining outstanding balances are either non recoverable or in the process of recovery through liquidators due to the significant downturn in the aquaculture industry and a number of companies subsequently going into receivership. The European Commission contests that the interest rates charged were not high enough to cover the risk associated with the loans. The Shetland Development Trust will be seeking to demonstrate that these loans were commercial and consistent with similar loans granted at the same time by normal private banks.
In the coming weeks, The Council will be working towards taking a delegation to Brussels to meet with Key representatives from the Commission. Neil Mitchison Head of the European Commission Office in Scotland is visiting Shetland on Thursday 5th of October for general discussions with local politicians and he will be returning with Commissioner Joe Borg, and Ross Finnie MP to visit Shetland on the 19th of October and the Council will be hoping to take forward any appropriate discussions on state aid with these parties.
Whilst the investigation continues into the grant and loan schemes, the further state aid complaints against the proposed investment into Smyril Line and the proposed new pier investment at Sellaness have halted any investment into these projects whilst further investigations into these specific complaints are concluded.
Ends.