PSG European Petitions Committee

Brussels to investigate Port Services dispute with Cromarty Firth Port Authority

The long-running dispute between Port Services and the Cromarty Firth Port Authority is to be investigated by the European Commission’s Petitions Committee.

Director Wendy Clark gave a submission to the Committee, which resulted in it agreeing to write to the Scottish Government and the Office of Fair Trading demanding a detailed response to the points raised.

A video the Port Services presentation and a copy of the presentation can be viewed here.

Download the video here

Port Services (Invergordon) Ltd.   Petition No. 0454 – 09

Wendy Clark’s speech to the PETI Committee, 27 January 2010: -

I would like to start by thanking the Committee for giving me and my company, Port Services Invergordon, the opportunity to raise this important issue with you.

Over the past ten years of the Cromarty Firth Port Authority (CFPA)  have served to prevent effective competition which has negatively impacted on the European market for the inspection, repair and maintenance of deep drafted semi submersible drilling rigs (IRM) for the North Sea oil and gas industries.  The European IRM market is worth about 400m euros per annum, while the portion spent in the Cromarty Firth is in excess of 120m euros

The issue that I bring before you is one of a public corporation abusing its dominant position and distorting a very narrow European market – there are only four ports in Europe, spread over a large geographical area, where IRM work of this nature can be undertaken, so the Cromarty Firth is a substantial part of the EU.

The Port Authority’s actions towards my company has made our presence and our ability to service contracts completely untenable and will, by creating an oligopoly, lead in the longer term to higher prices and a much reduced level of service.  Port Services requires facilities on the Cromarty Firth Service Base  to enable us to operate our business from; relocating to Poland, Norway or Holland – as I hope the Committee will agree – is not an option.

We have tried to resolve our problems  with the CFPA directly, and also  by taking our complaints to the Scottish and UK Governments who claim they have no locus to intervene as our  complaints are merely  considered to be commercial disputes. 

As I explained in our petition to the Committee, there are several areas of concern:
 
• Firstly, Port Services temporary licence – not a long term lease as offered to our competitors- has been terminated by the CFPA, while the CFPA continue to provide our competitors with adequate land, accommodation and warehousing which they require to operate and develop their businesses. No commercially viable alternative has been offered to PSI by the CFPA.

• Secondly the  CFPA is a trust port, classified as a public corporation and listed in Her Majesty’s Government’s asset register. Responsibility for Scottish ports was devolved to the Scottish Parliament through the Scotland Act 1998; therefore Holyrood, like England and Wales, is guided by the principles enshrined in the Government guidance, “Modernising Trust Ports. A Guide to Good Governance". The uniform implementation of those guidelines, focusing on the application of the principles in the Cromarty Firth,  is of serious concern, particularly:

- the impartiality of the CFPA’s board appointment process and subsequently the independence of the CFPA’s board;

- use of publicly-owned assets; and abuse of a dominant position.

All of these transgressions contradict the CFPA’s own mission statement that the CFPA ‘…exists to develop, improve and safeguard the Cromarty Firth as a port for the benefit of all its stakeholders.

The situation is further complicated by the UK devolved agenda. In particular, the responsibility for ports now resides with the Scottish Government, while the responsibility for competition law resides with the UK Government. As you can imagine, this has led to a highly undesirable situation where my company in seeking a resolution has been passed from pillar-to-post by all parties concerned. This is made worse  by a lack of understanding of the trust port model which has resulted in unsatisfactory action by both the Scottish and UK Government.

• Our complaint has been referred to the UK’s Office of Fair Trading twice and they responded by stating due to limited resources they must prioritise their work  and they do not consider it appropriate to investigate our case, but they did say that this was “an administrative decision and does not reflect a substantive view of the merits of our case.”

Essential Facilities Doctrine
 
• The Cromarty Firth Service Base is governed by the Essential Facilities Doctrine, access and premises are vital for companies who wish to offer port related services.  The  Base is controlled by an Undertaking which is abusing its dominant position and monopoly by refusing to supply PSI with adequate facilities to enable us to compete on equal terms with our competitors, thereby  distorting the European IRM market which is in breach of Article 82 .

The CFPA has tried to impose a prime contractor for the IRM industry, confirmed by the Highland Council minutes dated 27 January 2006. The minute reveals that the CFPA Chairman agreed to implement a prime contractor through the CFPA which would have controlled the local supply chain.  Therefore the prime contractor  would gain  by levying a premium,10% or similar on the suppy chain  costs;  which over a £25m contract is a significant profit. These minutes are a clear commitment of intent to distort the European IRM market, which last summer came to bear when the Port Authority once again removed Port Services from their premises on the Service Base when we refused to stop competing in this market.

The CFPA, although a public corporation, operates commercially,   in competition to Port Services and others port users. By refusing to lease PSI accommodation to allow us to operate  and compete on equal terms with the Authority they are placing PSI at a serious disadvantage and  distorting competition in the internal market which is subsequently distorting  competition in the EU market.  - I contest, again – the CFPA is infringing Article 82.

The Cromarty Firth and the European IRM market

Invergordon, on the Cromarty Firth North of Inverness, is regarded as the premier port in Europe for IRM.   Invergordon’s capability to service rigs can be seen on a daily basis. We are able to berth three rigs for upgrading simultaneously on the Cromarty Firth Service Base while an additional 16 drilling rigs can be moored in the Firth at any one time. There are only three other comparable rival ports in Europe – namely Rotterdam, Gdansk and  Norway.
The very deep waters which are crucial for deep draughted semi-submersible drilling rigs to berth at the Cromarty Firth Service Base - place Invergordon at the centre of the European IRM market,.
PSI, alongside our competitors such as Global Energy is one of the few companies, which have the skills, size, experience and competence, as an alternative service provider, but the Port Authority is denying us operational land and facilities.

The impact on the Cromarty Firth and PSI’s share of the European IRM market

In May 2008 the CFPA issued PSI with a statutory notice to quit the offices we occupied,  and we were forced to relocate to a portacabin. In May 2009 the CFPA issued PSI with a notice to quit the site we relocated to as the Authority wished to use this space to create four car parking places for our competitors. ( after the CFPA installed modular offices accommodation for said competitors at a cost of £400000). However  CFPA did give us a temporary licence for a substandard wooden hut which can accommodate three office staff.  As there was no guarantee the Authority would extend this licence after a year and due to the lack of suitable port facilities and the unfair trading conditions we relocated all our heavy cranes and haulage operation to Aberdeen. It should be noted that during this period this period the CFPA gave available office accommodation to Global Energy and an Aberdeen based crane hire company to enable them to  set up in competition to Port Services and the Authority also ignored the Cromarty Firth Port Users request to allow PSI to re-align the portacabin in line with the newly installed Global Energy offices.
 
This has severely affected the market and the regional economy, as  regrettably, my company was forced to make 31 local redundancies as we did not have facilities for them.  This has resulted in the loss of the Ports highly skilled permanently employed stevedoring crew and the relocation of  all the ports heavy lifting capabilities, including one of only two 1000 tonne cranes in the UK.  This has made the Cromarty Firth much less competitive as all heavy cranes and heavy haulage has to be  mobilised from outwith the area with port customers incurring additional mobilisation costs.

 The inadequate facilities we presently operate from makes the servicing of our contracts extraordinarily difficult.

The Commission’s reply, 1 September 2009

As I have explained and contend, Article 81 and Article 82 of the EC Treaty do apply in PSI’s case – decisions have been made which have restricted competition; , through its actions, the Authority has abused its dominant position, which has adversely impacted on the European IRM market and trade between Member States.

Conclusion
As explained in our petition, the problem is complicated and has a long history stretching back over 10 years. The Cromarty Firth Port Authority is abusing its position by forcing my company out of the port for the benefit of our competitors, while concessions are not awarded on a transparent and non-discriminatory basis.

The removal of PSI from the Service Base last year has severely impacted on the regional, national and EU IRM market.   The UK and Scottish Authorities have failed in statutory obligations to ensure the CFPA comply with UK and EU Competition Law, therefore  we request the Committee's support to resolve this issue urgently,  and for the situation to be investigated by the Commission.