Tuesday 28 May 2019 2:28 pm | Updated: Monday 17 June 2019 10:23 pm

P&O Ferries sues government for £33m over Eurotunnel settlement fallout

P&O Ferries is suing the government for £33m over its decision to settle a challenge against its no-deal Brexit ferry contracts.

P&O wants the government to cancel the £33m it paid out to rival operator Eurotunnel, which challenged the Department for Transport's (DfT) decision to award a contract for ferries in a no-deal Brexit to three firms, including Seaborne Freight, which had no ships.

Eurotunnel launched legal action after it complained that the procurement process for the contracts, which also went to Brittany Ferries and DFDS, had been "secretive".

The government later paid Eurotunnel £33m to settle the dispute and later cancelled all of the no-deal ferry contracts.

A P&O spokesperson said: “We can confirm that we have initiated legal proceedings against the government over its £33m payment to Eurotunnel.

"We have repeatedly made clear during decades of providing vital transport services between Britain and the continent that we are happy to compete with other providers on a level playing field. We also fully accept that it was prudent of the government to make contingency plans to protect international supply chains in the event of a hard Brexit.

"However, we do not believe that the payment of £33m of public money to Eurotunnel to settle its legal challenge to these plans is fair or reasonable. It is explicitly designed to be invested in the tunnel's infrastructure and if left unchallenged would put our services at a competitive disadvantage."

In court documents seen by the BBC, P&O claims that the Eurotunnel settlement amounts to a public contract because the firm was mandated to carry out improvements to its terminal in Kent.

P&O claims the sum "was not, and could not be, a genuine estimate of Eurotunnel's alleged losses", adding that such an agreement "could only lawfully have been entered into following a duly advertised and competitive tender process".

P&O has also sought a judicial review against the DfT, which maintains that it "acted appropriately in reaching the agreement with Eurotunnel".

Shadow transport secretary Andy McDonald said: “Labour warned Chris Grayling several months ago that his sweetheart deal with Eurotunnel could leave taxpayers exposed to further satellite litigation.

“P&O’s action against the department follows the news last week that four transport companies are challenging ministers’ rail contract decisions and is yet another DFT procurement debacle. This country can no longer afford Chris Grayling.”

A DfT spokesperson said: “This cross-government decision helped protect vital freight capacity for medical supplies to enter the country, in the event the UK left the EU without a deal.

“We are confident we acted appropriately in reaching the agreement with Eurotunnel. The agreement explicitly permits the government to procure additional capacity in the future where needed.”

As well as the legal action from P&O, the DfT is also facing claims from Stagecoach, Virgin and French state-owned rail company SNCF over its decision to disqualify Stagecoach from three rail franchises.