Ferry firm loses subsidies legal challenge

Pentland Ferries operates a service between Orkney and Caithness

A ferry firm has lost a legal challenge against Scottish government subsidies to a rival on services between mainland Scotland and the Northern Isles.

Three companies tendering for the £370m contract - CalMac Ferries, Förde Reederei Seetouristik GmbH and Serco NorthLink - were revealed in February.

Lawyers for Pentland Ferries told the Court of Session the Scottish government was acting unlawfully.

Lord Boyd of Duncansby dismissed the company's arguments.

The judge's full decision will be released later.

'Extremely disappointed'

Pentland Ferries currently operates a service between Caithness and Orkney.

Pentland Ferries said in a statement: "We are extremely disappointed with today's decision and will now take some time to reflect and decide on our next steps.

"All we are asking for as a family owned, subsidy free local business is to be allowed to operate on a level playing field."

Minister for the Islands, Paul Wheelhouse, said: "We are very pleased that the court has rejected the arguments and dismissed the petition, allowing us to focus on delivering the tender of the next contract to operate the Northern Isles ferry services."

'Existential threat'

The contract will run for eight years.

Mark Lindsay QC told the court during an earlier hearing that the firm viewed the process as "an existential threat" and feared it might no longer be able to trade.

A separate referral to the European Commission, claiming the subsidies breach EU competition rules, is continuing.

In 2012, ministers awarded a six-year contract to Serco.