Transport secretary Chris Grayling has insisted his department’s use of emergency powers to procure additional no-deal Brexit ferry capacity was “justified” despite the decision resulting in an agreement to pay £33m to rail operator Eurotunnel following a legal challenge.
In a letter to MPs on parliament's Transport Select Committee nearly a month after DfT announced the payout, Grayling said he stood by the decision not to hold an open tender process for contracts to transport goods such as food and medicines in the event of a no-deal Brexit.
The department settled with Eurotunnel out of court in March, after the Channel Tunnel operator took legal action because it was not invited to bid for the contracts. As part of the £33m deal, Eurotunnel agreed to improve security and traffic flow on its services, which the government said would help ensure the flow of goods in a no-deal scenario.
DfT invited only a handful of companies to participate in a closed bidding round, before awarding contracts totalling more than £100m to three companies: Brittany Ferries, DFDS and Seaborne Freight.
Seaborne later lost its £13.8m contract when it became apparent that the company, which notoriously owned no ferries, could not deliver. As a consequence, the settlement agreed with Eurotunnel as a result of its challenge to the procurement process has come at a cost of well over one-third of the price of the capacity the government succeeded in securing.
“We continue to believe, and our defence would have argued [had the case gone to court], that the procurement process was lawful… [and] justified in these specific circumstances and that the contracts were otherwise legally sound,” Grayling said in a letter to Transport Committee chair Lilian Greenwood.
“We were always clear that there were legal risks associated with the procurement,” he added.
“We considered that these were appropriate to take given the critical importance of these contracts in securing the unhindered supply of medicines, which are critical to human life, health and welfare, in a no-deal Brexit.”
Grayling was responding to a series of questions from the committee about how the settlement was reached and how the money would be spent.
He said the size of the settlement was partly determined by an estimate of how much it would cost to secure extra capacity to move goods between the UK and France through a separate procurement process.
“These options would, necessarily, have been at a higher cost than the critical capacity secured from Brittany and DFDS, reflecting the significantly shorter time to put them into place and the more limited options that would then have been available,” he said.
Grayling confirmed that the government will not be able to recover any of the £33m if the UK reaches a withdrawal agreement with the EU. He added that the government could seek to recover any underspend in court if Eurotunnel fails to spend the money as agreed, to improve the security, infrastructure and “border preparedness” of its cross-Channel train line.
However, he argued that the settlement will “provide benefits to UK security and resilience” whether or not a Brexit deal is agreed.
A document detailing the settlement agreement, published alongside Grayling’s letter, says Eurotunnel must use the funds to “implement projects to develop, enhance and upgrade the Channel Tunnel site’s infrastructure for improving the resilience of the UK terminal of the fixed link and the immediate surrounding environment”.
Within these parameters, it is up to Eurotunnel to decide exactly how to spend the settlement funds.
Grayling said it was “impossible” to say how much of the money would be spent on making improvements to infrastructure in France rather than the UK. However, he noted that the settlement meant any money invested in France must be spent on counter-terrorism measures.
“Such spending should result in increased security on UK-bound traffic, thereby providing broader benefits to the UK,” he said.
The agreement also requires Eurotunnel to provide the government with regular audited project reports setting out how it is spending the money, Grayling added.
The settlement document notes that the agreement is “is not, and shall not be represented or construed” as, an admission of liability or wrongdoing by either DfT or Eurotunnel.
It says DfT will pay the sum to Eurotunnel in three April instalments of £11m in 2019, 2020 and 2021.
It confirms that DfT will bear its own legal costs for the dispute, while Eurotunnel would in turn pay its own costs.