Publication - FOI/EIR release

Loans to Ferguson Marine: FOI release

Published: 1 Nov 2018

Information request and response under the Freedom of Information (Scotland) Act 2002.

Published:
1 Nov 2018
Loans to Ferguson Marine: FOI release
FOI reference: FOI/18/02660  
Date received:  26 September 2018
Date responded: 24 October 2018
 
Information requested
 
1. The legal advice the Scottish Government took in advance of loaning Ferguson Marine £45 million including any legal advice taken in regards to the need to notify the European Commission in relation to said loan to ensure that it is not in breach of EU state-aid rules.

2. All correspondence with the European Commission, or any of the European institutions, concerning the £45 million loan to Ferguson Marine by the Scottish Government.

3. Had documentation (i.e. minutes) pertaining to any discussion of any considerations around moving the construction of the MV Glen Sannox to another shipyard within or outside of Scotland to complete construction for any reason.

4. All records of due diligence undertaken before the decision was taken to loan Ferguson Marin £45 million.

5. When it was agreed that the £45 million would go ahead and when the initial discussions took place regarding the loaning or investment of any sum of money into Ferguson Marine.
 
6. Where in the budget the £45 million have been allocated and whether these come from Government reserves, existing money in the budget, whether it is borrowed money or from open market operations.

7. How many of the approximately 400 jobs that have been employed to carry out the Scottish Government’s ferry contract are UK residents and how many of them are seasonal/temporary workers from other countries.

8. Under the terms of the current franchising agreement with CalMac, under what circumstances, if any, would a re-tender of the ferry franchise would be legal and what the process for triggering a re-tender would be?

9. What the terms of repayment are on the loans made to Ferguson Marine, when the repayment is due, what interest rate is being charged on the loans and what are the terms of enforcement of payment is not given.
 
Response
 
1.  The Scottish Ministerial Code states that Ministers must not ordinarily divulge either the source or content of legal advice. We are able to confirm on this occasion that the Scottish Government has taken appropriate legal advice on this matter.

An exemption under section 36(1) of FOISA applies to the information requested because it is legal advice and disclosure would breach legal professional privilege.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption.

We recognise that there is some public interest in release as part of open and transparent government, and to inform public debate. However, this is outweighed by the strong public interest in maintaining the right to confidentiality of communications between legal advisers and clients, to ensure that Ministers and officials are able to receive legal advice in confidence, like any other public or private organisation.

2. Scottish Ministers have provided two commercial loan facilities to Ferguson Marine Engineering Limited. These were negotiated on fully commercial terms following appropriate due diligence and with the benefit of independent third-party verification. On this basis we concluded there was no state aid present in the loans provided to Ferguson Marine.

3. An exemption under section 30(c) of FOISA (prejudice to effective conduct of public affairs) applies to the information requested. Disclosing this information would substantially prejudice our ability to manage the effective oversight of public contracts. FOISA recognises the need for Ministers and officials to have a private space within which to seek advice and discuss options before reaching a settled public view. Disclosing the content of such advice/discussions will substantially inhibit the free and frank provision of advice and/or exchange of views in the future, particularly if those discussions relate to sensitive issues. This would constitute substantial prejudice to the effective conduct of public affairs in terms of the exemption.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption. We recognise that there is a public interest in disclosing information as part of open, transparent and accountable government. However, there is a greater public interest in protecting the process of the effective oversight of public contracts and ensuring that the Scottish Government is able conduct this aspect of its business effectively.

4. Lending by Scottish Ministers is governed by a series of controls that ensure the public purse is protected. This includes appropriate due diligence supported by independent third-party verification on matters commercial and legal.

The nature of information disclosed to the Scottish Government in the course of commercial negotiations and due diligence is sensitive and confidential. The Government has a duty of care to the business concerned to protect its sensitive commercial information.

An exemption under section 33(1)(b) of FOISA (commercial interests) applies to the information requested. This exemption applies because disclosure of this particular information would, or would be likely to, prejudice substantially the commercial interests of Ferguson Marine.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption. We recognise that there is a public interest in disclosing information as part of open and transparent government, and to help account for the expenditure of public money. However, there is a greater public interest in protecting the commercial interests of companies which enter into commercial loan agreements with the Scottish Government.

5. Scottish Ministers have provided two commercial loan facilities to Ferguson Marine Engineering Limited – one for borrowing up to £15 million and one for borrowing of up to £30 million. The loan agreements were signed on 6 September 2017 and 25 June 2018 respectively. The loan agreements were arranged over a period of several weeks.

6. The initial £15 million loan facility agreed in September 2017 was funded from within existing budgets as part of the Scottish Government’s in year budget management. The second £30 million loan facility granted in June 2018 will be funded from within existing budgets as part our budgetary management for the current financial year.

7. Workforce levels, terms and conditions of employment, the domiciliary arrangements and residency status of the workers employed at Ferguson Marine Engineering Limited are all matters for the business and individuals concerned. The Scottish Government does not hold the information requested.

8. Section 25(1) of FOISA exempts information from disclosure where the requester can reasonably obtain the information without making a request for it.

The provisions governing the termination of the Clyde and Hebrides Ferry Services contract between the Scottish Ministers and CalMac Ferries Ltd are contained within that contract. A copy is available at the following link https://www.transport.gov.scot/publication/contract-for-provision-of-ferry-services-2016-2024-clyde-and-hebrides/. Some information has been redacted in line with FOISA exemptions.

9.Section 25(1) of FOISA exempts information from disclosure where the requester can reasonably obtain the information without making a request for it.

The terms and conditions of the June 2018 and September 2017 loan agreements between the Scottish Government and Ferguson Marine have been published in response to previous FOI cases (FOI/18/02035 Review and FoI/18/02244) and can be accessed at https://beta.gov.scot/publications/foi-18-02035-review/ and https://beta.gov.scot/publications/foi-18-02244/.

Some of the information contained in the loan agreements has been withheld as it is commercially confidential and exempt under section 33(1)(b) – substantial prejudice to commercial interests. The information has commercial value and its disclosure could substantially prejudice the commercial interests of Ferguson Marine.
This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption. We recognise that there is a public interest in disclosing information as part of open and transparent government, and to help account for the expenditure of public money. However, there is a greater public interest in protecting the commercial interests of companies which enter into commercial loan agreements with the Scottish Government.
 
About FOI

The Scottish Government is committed to publishing all information released in response to Freedom of Information requests. View all FOI responses athttp://www.gov.scot/foi-responses

Contact

Please quote the FOI reference
Central Enquiry Unit 
Email: ceu@gov.scot
Phone: 0300 244 4000

 
The Scottish Government 
St Andrew's House 
Regent Road 
Edinburgh 
EH1 3DG